Top 8 Challenges Hotel Owners Face

Ezra Cabrera | January 14, 2022


    The hotel sector is among the fastest-growing industries in the world. But despite their success, hoteliers still need to step up their game to stay ahead of their competitors. Whether you need to apply for hotel financing, implement new marketing decisions, or adopt the latest innovations, it’s your responsibility to make sure that your hotel is making money.

    It’s important to be familiar with the common challenges hotel owners face so you can be prepared for anything. Especially now that we’re in the post-pandemic era, it’s vital that you’re aware of the struggles, so you can plan for the future.

    With that said, here are the top eight challenges for hotel businesses.

    1. Seasonality of Demand

    Seasonality is a common problem almost every hotelier has experienced. Peak seasons, like national holidays, Christmas, etc. means more customers and an increase in profit. But if hoteliers don’t anticipate the number of bookings, your staff and management will undergo unnecessary stress and longer working hours.

    To ensure successful business operations, it’s crucial to keep up with the seasonality of demand. You might need to hire more personnel, change your rates, and open additional rooms. However, you also need to remember that demand will significantly drop during slower seasons. The additional employees and the resources you make use of during peak seasons may be more difficult to maintain during these times.

    Effective management and diversification are necessary to manage the seasonality of demand in the hospitality industry.

    2. Sustainability

    Everyone is taking part in making the world a better and greener place to live in, including hotel owners. Businesses from various industries are taking proactive steps to reduce their carbon footprint. For the hotel industry, many hoteliers try to improve sustainability by using environment-friendly materials and redesigning their products and services.

    Going green doesn’t have to be complicated. You can improve sustainability by encouraging your guests to reuse their towels and sheets. Another example would be banning the use of single-use plastic such as straws, plastic bottles, etc. Moreover, supporting environmental movements and activities may also help increase your client base. As people more and more people get environmentally conscious, staying at a hotel that aligns with their values can likely increase customer satisfaction.

    Overhead vs. Operating Expenses

    Businesses incur two types of expenses each month: overhead and operating expenses. As mentioned, overhead costs are indirect costs or business expenses that don’t directly generate revenue for the business. Operating expenses refers to business expenses like direct labor, materials, and other costs that allow the business to continue running (thus, the term ‘operating’ expenses).

    3. Increasing Competition

    Despite the economic downturn brought by the pandemic, the number of hotels in the United States continues to increase. Hotels must establish their competitive advantage to succeed amidst tough competition. Hotels have gained serious competition since the launch of Airbnb. Airbnb provides a convenient solution for guests looking for freedom, affordability, and a more culturally rich travel experience.

    To compete with Airbnb, hotels need to highlight the services they offer that Airbnbs do not, such as consistent customer service, amenities (pool, Wi-Fi, gym, restaurants, room service, etc.), as well as trust and safety.

    4. Change in Customer Demands

    The goal of every business is to satisfy customer demand. However, understanding customer behaviors is one of the challenges that hoteliers face. Customer demands and expectations change all the time. More people are getting more impatient, especially with the emergence of technology. With that said, the ever-changing expectations and demands are a few of the biggest challenges hoteliers face.

    It’s tough to meet every trend and demands. However, it’s important to cover the basics to ensure your customers will have a pleasant stay. Fast Wi-Fi, personalized service, fast check-ins and check-out process, entertainment, as well as other unique services are crucial to improving your customer satisfaction.

    5. Cash Flow Issues

    Healthy cash flow is essential in keeping your business operational. Cash flow problems usually occur when there is a delay in receiving payments from customers. Almost every business, small or large, experienced cash flow issues, including hotels. To avoid cash flow issues, it’s important to manage your finances effectively. You can delay the disbursement of cash while encouraging your clients to repay their loans faster.

    Related: 5 Effective Ways to Cut Hotel Operating Costs

    Another way to unlock working capital is to accept direct bookings from online channels where customers pay in advance. In this way, you’ll be able to access working capital to pay for daily business expenses like utility bills, payroll, inventory, maintenance, and more.

    6. Keeping Up with Technological Advancements

    Hoteliers are clamoring to keep up with the ever-changing technology. Because customers are now tech-savvy than ever before, a majority of hotels now have Wi-Fi and smart TVs. That’s why it’s imperative for hoteliers to explore different hotel financing to fund these advancements.

    Hotel technology has evolved over the years. Currently, some hotels offer virtual reality and augmented reality tours on their website. Some hotels are also transitioning into ‘smart’ hotels, where guests can control their room – from lights, temperature, music, etc. – through a mobile device. Aside from meeting customer needs, hotels can also use technology to streamline workflow and improve productivity, enabling hoteliers to stay on top of business operations through their phones.

    7. The Shift in Marketing Trends

    On-going changes in marketing and advertising are also one of the challenges hoteliers face. The marketing strategies that were hit 10 years ago may not fare well today. Most of the marketing and advertising strategies are now geared online. Social media, websites, Google My Business, and SEO are not optional anymore. It’s a need. You need to adapt to these new marketing trends otherwise, you’ll get left out.

    8. Attracting and Retaining Clients

    Loyalty programs have been the primary way hotels and other businesses use in attracting and retaining clients. While it’s still effective, hoteliers still struggle on competing with other hotels using their loyalty programs. Many have to keep up in order to catch the attention of clients. This could mean offering bigger discounts, more freebies, or offering referral fees.

    That being said, those new to the industry may have to keep up and offer loyalty programs as part of their marketing efforts. If cash is tight, this may further put a strain on their finances. Luckily, there are financing options they can apply for to help fund this initiative.

    Fast Hotel Financing for Your Hotel

    The tourism and hospitality industry is a growing sector. With B&Bs and hotels opening up every day, you have to keep up with competition to avoid being left behind. Although challenges will always be present, it’s important to prepare yourself for them. When unexpected challenges arise, it’s important to have quick access to hotel financing. With extra funding, you can implement improvements and changes in your hotel and make sure that it will provide top-notch service to your guests.

    Related: 8 Things You Need to Do Before Applying for Small Business Loans

    About the Author

    Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.